Exhibit 99.3

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

COMBINED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2005

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

COMBINED FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2005

TABLE OF CONTENTS

Page No.

Independent Auditors’ Report

Combined Balance Sheet

Combined Statement of Operations

Combined Statement of Members’ Equity (Deficit)

Combined Statement of Cash Flows

Notes to Combined Financial Statements

INDEPENDENT AUDITORS’ REPORT

To the Members

Lightstone Member LLC, PRC Member LLC,

Lightstone Member II LLC and Lightstone Member III LLC

White Plains, New York

We have audited the accompanying combined balance sheet of Lightstone Member LLC, PRC Member LLC, Lightstone Member II LLC and Lightstone Member III LLC (the “Companies”) as of December 31, 2005, and the related combined statements of operations, members’ equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Companies’ management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companies’ internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Companies as of December 31, 2005 and the combined results of operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

_____________________________________
The Schonbraun McCann Group, LLP

Roseland, New Jersey

February 28, 2006

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

COMBINED BALANCE SHEET

DECEMBER 31, 2005

(Dollar amounts in thousands)


ASSETS

Investments in real estate, at cost, net of accumulated depreciation of $8,765	$	302,087

Other Assets
Cash and cash equivalents		3,488
Escrow deposits		15,245
Rents and other receivables, net of allowance of $450		5,466
In place lease value, net of accumulated amortization of $5,137		13,438
Acquired lease rights, net of accumulated amortization of $1,847		8,861
Deferred financing costs, net of accumulated amortization of $1,884		2,202
Prepaid expenses		895

	$	351,682


LIABILITIES AND MEMBERS’ EQUITY (DEFICIT)

Liabilities
Mortgage and other notes payable	$	303,350
Notes payable – related party		28,200
Interest payable		1,497
Deferred revenue		1,629
Accounts payable, accrued expenses and other liabilities		5,185
Acquired lease obligation, net of accumulated amortization of $3,127		8,512
Due to affiliates		4,315

		352,688

Commitment and Contingencies

Members’ Equity (Deficit)		(1,006	)


	$	351,682

The accompanying notes are an integral part of the combined financial statement.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2005

(Dollar amounts in thousands)


Revenue
Rental	$	31,439
Tenant reimbursements		13,421
Interest and other income		1,493

		46,353


Expenses
Rental property operating and maintenance expenses		17,035
Real estate taxes		3,959
Interest, including amortization of $1,429		18,825
Depreciation and amortization		12,229
General and administrative		2,713

		54,761


Net Loss	$	(8,408	)

The accompanying notes are an integral part of the combined financial statement.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

COMBINED STATEMENT OF MEMBERS’ EQUITY (DEFICIT)

FOR THE YEAR ENDED DECEMBER 31, 2005

(Dollar amounts in thousands)

	Presidential Realty Corp.			David Lichtenstein			Cedar Asset Management, LLC			Harold Rubin			Total
Balance at January 1, 2005
PRC Member LLC	$	1,374		$	(155	)	$	(2	)	$	—		$	1,217
Lightstone Member LLC		(200	)		253			4			—			57
Lightstone Member II LLC		—			2,480			—			—			2,480
Lightstone Member III LLC		—			—			—			—			—

		1,174			2,578			2			—			3,754

Contributions:
PRC Member LLC		—			—			—			—			—
Lightstone Member LLC		—			—			—			—			—
Lightstone Member II LLC		—			—			—			150			150
Lightstone Member III LLC		—			4,579			—			—			4,579

		—			4,579			—			150			4,729

Distributions:
PRC Member LLC		(90	)		(112	)		(1	)		—			(203	)
Lightstone Member LLC		(186	)		(471	)		(6	)		—			(663	)
Lightstone Member II LLC		(58	)		(140	)		—			(17	)		(215	)
Lightstone Member III LLC		—			—			—			—			—

		(334	)		(723	)		(7	)		(17	)		(1,081	)


Net loss		(2,438	)		(5,901	)		(50	)		(19	)		(8,408	)


Balance at December 31, 2005	$	(1,598	)	$	533		$	(55	)	$	114		$	(1,006	)

The accompanying notes are an integral part of the combined financial statement.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

COMBINED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2005

(Dollar amounts in thousands)

Increase (decrease) in cash and cash equivalents


Cash Flows From Operating Activities:
Net loss	$	(8,408	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		13,658
Net change in revenue related to acquired lease rights/obligations and deferred rent receivable		(1,568	)
Bad debt write-off		450
Rents and other receivables		(4,375	)
Prepaid expenses		(244	)
Accounts payable, accrued expenses and other liabilities		3,686
Interest expense payable		1,474
Due to affiliates, net		2,379
Deferred revenue		865

Net cash provided by operating activities		7,917

Cash Flows Used In Investing Activities:
Real estate acquisition		(167,006	)
Escrow deposits, net		(6,517	)
Additions to properties		(4,389	)

Net cash used in investing activities		(177,912	)

Cash Flows From Financing Activities:
Proceeds from mortgage notes payable		158,850
Proceeds from notes payable - related party		9,500
Deferred financing costs		(178	)
Capital contributions		4,729
Capital distributions		(1,081	)

Net cash provided by financing activities		171,820


Net increase in cash and cash equivalents		1,825

Cash and cash equivalents, beginning of year		1,663


Cash and cash equivalents, end of year	$	3,488


Supplemental Disclosures of Cash Flow Information:
Cash paid during the year ended for:
Interest	$	15,810

The accompanying notes are an integral part of the combined financial statement.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

1.	ORGANIZATION AND DESCRPTION OF BUSINESS

Formation

Lightstone Member LLC (“Lightstone”) and PRC Member LLC (“PRC”) were both organized under the laws of the Commonwealth of Delaware on September 10, 2004. Lightstone Member II LLC (“Lightstone II”) and Lightstone Member III LLC (“Lightstone III”) were formed under the laws of Commonwealth of Delaware on December 1, 2004 and June 30, 2005, respectively. They are collectively the “Entities” or the “Companies”. The purpose of the Companies is to acquire, own, develop and manage retail malls. The Companies own the following retail malls as of December 31, 2005:

Property Name	Location	Approximate Square Feet	Ownership	Occupancy
Martinsburg Mall	Martinsburg, WV	552,000	Fee	93%
Mt. Berry Square Mall	Rome, GA	478,000	Fee	87%
Bradley Square Mall	Cleveland, TN	385,000	Fee	87%
W. Manchester Mall	York, PA	733,000	Fee	88%
Shenango Valley Mall	Hermitage, PA	508,000	Leasehold	95%
Shawnee Mall	Shawnee, OK	444,000	Fee	65%
Brazos Outlet Center	Lake Jackson, TX	587,000	Fee	80%
Burlington Mall	Burlington, NC	412,000	Fee	94%
Macon Mall	Macon, GA	1,446,000	Fee/Leasehold	94%


		5,545,000

As of December 31, 2005, members of the Companies and their respective percentage interests are as follow:


Lightstone and PRC	Ownership Interests
Presidential Realty Corp.		29%
David Lichtenstein (Managing Member)		70%
Cedar Asset Management, LLC			1%

Lightstone II	Ownership Interests
Presidential Realty Corp.		29%
David Lichtenstein (Managing Member)		70%
Harold Rubin			1%

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

1.	ORGANIZATION AND DESCRPTION OF BUSINESS (Continued)

Formation (continued)

Cash Distribution, Profit and Loss Allocations

The Companies shall continue to operate until dissolved per the operating agreements. The liability of each of the members is limited to the amount of capital contributed.

Distributions of proceeds shall be distributed to the members at the discretion of the Managing Member, subject to the terms and conditions of all indebtedness of the Companies; provided that cash flow shall be distributed not less than annually and capital proceeds shall be distributed not later than forty-five days from the closing of the transaction giving rise to such capital proceeds.

Distributions of cash flow shall be made to the members as follows:

(a)

First, to the Managing Member and its affiliate, Cedar Asset Management, LLC (or Harold Rubin), until the Managing Member and its affiliate (or Harold Rubin) have received an aggregate amount equal to an accrued return of 11% per annum (“Preferred Return”) on the Managing Member’s and affiliate’s unreturned capital contribution.

(b)

Then, to the members in accordance with their respective ownership interests.

Capital proceeds shall be distributed to the members as follows:

(a)

First, to the Managing Member and its affiliates, until the Managing Member and its affiliates have received an aggregate amount equal to an accrued return of 11% per annum on the Managing Member’s and its affiliates’ unreturned capital contribution.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

1.	ORGANIZATION AND DESCRPTION OF BUSINESS (Continued)

Cash Distribution, Profit and Loss Allocations (continued)

(b)

Then, to the Managing Member and its affiliates, until the Managing Member and its affiliates have received an aggregate amount equal the Managing Member’s and its affiliates’ capital contribution.

(c)

Then, to the members in accordance with their respective ownership interests.

Allocation of Profits and Losses

For financial reporting purposes, income is allocated based upon the cash flow distribution formula above. Losses are allocated pro-rata based upon ownership interests.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The accompanying combined financial statements have been prepared on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Combination

The combined financial statements include the accounts of Lightstone and its wholly owned subsidiaries; Mount Berry Square Mall LLC, Bradley Square Mall LLC, West Manchester Mall LLC and Shenango Valley Mall LLC; PRC and its wholly owned subsidiary; Martinsburg Mall LLC; Lightstone II and its wholly owned subsidiaries; Shawnee Mall LLC and Brazos Outlet Mall LLC; Lightstone III and its wholly owned subsidiaries; Macon Mall LLC and Burlington Mall LLC. All material intercompany balances and transactions have been eliminated in combination. The financial statements were combined due to common ownership and control.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. They also affect reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the carrying amount of investments in real estate, valuation of receivables and the allocation of purchase price to acquired lease rights and obligations. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Companies consider short-term investments with maturities of 90 days or less when purchased to be cash equivalents. The Companies maintain cash accounts at financial institutions, which are insured up to a maximum of $100,000. At various times during the year, balances exceeded the federally insured limit. Due to the stature and high credit quality of the financial institutions, such credit risk is considered to be minimal.

Marketing

General marketing and advertising costs are expensed as incurred and were approximately $600.

Revenue Recognition and Tenant Receivables

Base rental revenues from rental retail properties are recognized on a straight-line basis over the noncancelable terms of the related leases, which are all accounted for as operating leases. “Percentage rent” or rental revenue which is based upon a percentage of the sales recorded by the Companies’ tenants, is recognized in the period in which the tenants achieve their specified threshold per their lease agreements. These amounts are included in rental revenue in the accompanying financial statements.

Rental income is also recognized in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, whereby the amortization of acquired favorable leases and acquired unfavorable leases is recognized as a reduction of or an addition to base rental income, respectively, over the terms of the respective leases. The net amount included in base rental income for the year ended December 31, 2005, is as follows:

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition and Tenant Receivables (continued)

Martinsburg Mall	$	(169	)
Bradley Square Mall		114
West Manchester Mall		476
Shenango Valley Mall		186
Mount Berry Square Mall		181
Shawnee Mall		54
Brazos Outlets Center		168
Burlington Mall		45
Macon Mall		12

	$	1,067

Reimbursements from tenants related to real estate taxes, insurance and other shopping center operating expenses are recognized as revenue, based on a predetermined formula, in the period the applicable costs are incurred. Lease termination fees are recognized when the related leases are canceled, the tenant surrenders the space, and the Companies have no continuing obligation to provide services to such former tenants.

The Companies provide an allowance for doubtful accounts against the portion of tenant receivables which is estimated to be uncollectible. Management of the Companies reviews its allowance for doubtful accounts monthly. Balances that are past due over 90 days and over a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered doubtful. Allowance for doubtful accounts as of December 31, 2005 was approximately $450.

Deferred Charges

Deferred leasing commissions, acquired in-place lease value, and other direct costs associated with the acquisition of tenants are capitalized and amortized on a straight-line basis over the terms of the related leases. Loan costs are capitalized and amortized to interest expense over the term of the related loan using a method that approximates the effective-interest method.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Real Estate and Depreciation

Real estate is stated at historical cost less accumulated depreciation. The building and improvements thereon are depreciated on the straight-line basis over an estimated useful life of 40 years. Tenant improvements are depreciated on the straight-line basis over the shorter of the lease term or their estimated useful life. Equipment is depreciated on the straight-line basis over estimated useful lives of 5 to 7 years.

Improvements and replacements are capitalized when they extend the useful life or improve the efficiency of the asset. Repairs and maintenance are charged to expense as incurred.

Impairment of Long-Lived Assets

Management assesses whether there has been impairment in the value of its long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. Management believes no impairment in the net carrying values of the investments in real estate has occurred.

Purchase Accounting for Acquisition of Interests in Real Estate Entities

Management allocated the purchase price of properties to tangible and identified intangible assets acquired based on its fair value in accordance with the provisions of SFAS No. 141, Business Combinations. The fair value of the tangible assets of an acquired property (which includes land, building, and improvements) is determined by valuing the properties as if vacant, and the “as-if-vacant” value is then allocated to land, building and improvements based on management’s determination of the relative fair values of these assets. Management determines the “as-if-vacant” fair value of properties using methods similar to those used by independent appraisers.

Factors considered by management in performing these analyses include an estimate of carrying costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Purchase Accounting for Acquisition of Interests in Real Estate Entities (Continued)

In allocating the fair value of the identified intangible assets and liabilities of acquired properties, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease values (included in the acquired lease rights in the accompanying combined balance sheet) are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values (presented as acquired lease obligations in the accompanying combined balance sheet) are amortized as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases.

The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease; however, the value of tenant relationships has not been separated from in-place lease value because such value and its consequence to amortization expense is immaterial for these particular acquisitions. The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off.

Purchase accounting was applied, on a pro-rata basis, to the assets and liabilities related to the Properties. The results of operations of the Properties since acquisition are included in the accompanying combined statement of operations. The purchase price of the Properties, including closing costs, were as follows:


Lightstone	$	84,089
PRC		27,247
Lightstone II		45,500
Lightstone III		167,006

	$	323,842

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Purchase Accounting for Acquisition of Interests in Real Estate Entities (Continued)

The fair value of the real estate acquired was allocated to the acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationships, if any, based in each case on their fair values.

The following are the amounts assigned to each major asset and liability caption at the acquisition date:

	Lightstone			PRC			Lightstone II			Lightstone III

Land	$	10,641		$	6,875		$	7,086		$	25,930
Buildings and tenant improvements		70,378			16,546			35,797			132,946
Acquired lease rights (1)		2,426			1,843			1,851			4,588
Acquired lease obligations (1)		(6,069	)		(781	)		(2,052	)		(2,737	)
In-place lease values (1)		6,713			2,764			2,818			6,279

	$	84,089		$	27,247		$	45,500		$	167,006

⁽¹⁾

These intangibles are being amortized over the remaining lease terms. The weighted average remaining lease terms are approximately 4.2 years.

Income Taxes

The Companies are limited liability companies which elected to be treated as partnerships for income tax purposes and are, therefore, not subject to income taxes at the entity level. All income and losses pass through to the members and are reported by them individually for income tax purposes.

3.	ESCROW DEPOSITS

Escrow deposits include funds and other restricted deposits required in conjunction with the Companies ‘ loan agreements. Such amounts are to be used for specific purposes, such as the payment of real estate taxes, insurance and capital improvements.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

4.	REAL ESTATE

At December 31, 2005, real estate consists of the following:


Land	$	50,532
Buildings and improvements		235,934
Tenant improvements		24,386

Total investment in real estate		310,852
Less accumulated depreciation		(8,765	)

	$	302,087

5.	MORTGAGE AND OTHER NOTES PAYABLE

On September 23, 2004, Lightstone, PRC and its subsidiaries borrowed $105,000 from Wachovia Bank, at an interest rate of LIBOR plus 360 basis points (approximately 7.98% at December 31, 2005). The loan is payable interest only monthly and is secured by the real estate, assignment of leases, rent and security deposits of Martinsburg Mall, LLC (“Martinsburg”), Shenango Valley Mall, LLC (“Shenango”), Berry Square Mall, LLC (“Berry”), West Manchester Mall, LLC (“West Manchester”) and Bradley Mall, LLC (“Bradley”). The loan matures in October 2006, with three one-year options to extend the loan for an extension fee of .125% of the outstanding principal and repayment of a certain amount of principal.

Management is currently pursuing the refinancing of this note into new fixed rate debt .

Management allocated the mortgage amount to the Properties as follows:


Martinsburg	$	22,962
Bradley		12,168
Shenango		13,750
Berry		25,176
West Manchester		30,944

	$	105,000

On December 16, 2004, Lightstone II borrowed $39,500 from Wachovia at an interest rate the greater of 8.8% or 30 day LIBOR plus 280 basis points (approximately 7.18% at December 31,2005). This loan is payable interest only monthly and matures on January 9, 2007 with three one-year options with an extension fee of .125% of the outstanding principal. This loan is secured by the real estate, assignment of leases, rent and security deposits of Brazos Outlet Center LLC (“Brazos”) and Shawnee Mall LLC (“Shawnee”).

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

5.	MORTGAGE AND OTHER NOTES PAYABLE (Continued)

Management allocated the mortgage amount to the properties as follows:


Brazos	$	21,725
Shawnee		17,775

	$	39,500

On June 30, 2005, Lightstone III borrowed $141,200 from Wachovia at an interest rate of 5.78% per annum. This loan is payable interest only monthly until July 11, 2006 and then installments of $827 as principal and interest until maturity on June 11, 2015. This loan is secured by the real estate, assignment of leases, rent and security deposits of Macon Mall LLC (“Macon”) and Burlington Mall LLC (“Burlington”). On June 30, 2005, Wachovia made an additional mezzanine loan in the amount of $17,650 under the same terms as the first mortgage.

Management allocated the mortgage and mezzanine loans to the properties as follows:

	First Mortgage		Mezzanine Loan
Macon	$	114,203	$	14,275
Burlington		26,997		3,375

	$	141,200	$	17,650

Future minimum annual principal payments due, assuming no extension options are exercised, as of December 31, 2005, are as follows:

	Mortgage Notes Payable		Mezzanine Notes Payable
2006	$	105,890	$	111
2007		41,359		232
2008		1,970		246
2009		2,086		261
2010		2,210		276
Thereafter		132,185		16,524

	$	285,700	$	17,650

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

6.	NOTES PAYABLE – RELATED PARTY

Lightstone borrowed $8,600 in 2004 from Presidential Realty Corp., a member of the Companies . The loan bears interest of 11% per annum, payable monthly. The entire loan payable is due in September 2014. The loan is secured by an assignment of the Companies’ ownership interest in its subsidiaries, subject to the first mortgage lien to Wachovia Bank.

The loan has a prepayment penalty of 3% of principal. In 2005, $959 was recorded as interest expense.

PRC borrowed $2,600 in 2004 from David Lichtenstein and Cedar Asset Management, LLC, members of the Companies. The loans bear interest of 11% per annum, payable interest only monthly. The entire loan balances are due in September 2014. The loans are secured by an assignment of the Companies’ownership interest in PRC’s subsidiary, subject to the first mortgage lien to Wachovia Bank.

This loan has a prepayment penalty of 3% of principal. In 2005, $290 was recorded as interest expense.

Lightstone II borrowed $7,500 in 2004 from Presidential Realty Corp., a member of the Companies. This loan bears interest only at the rate of 11% per annum payable in monthly installments and matures on December 23, 2014. This loan is secured by interest in certain subsidiaries subject to the first mortgage lien to Wachovia Bank.

This loan has a prepayment penalty of 3% of principal. In 2005, $836 was recorded as interest expense.

On June 30, 2005, Lightstone III borrowed $9,500 from Presidential Realty Corp., a member of the Companies. This loan bears interest only at a rate of 11% per annum payable monthly and matures on June 30, 2015. This loan is secured by membership interests in certain subsidiaries, subject to the first mortgage lien to Wachovia bank.

This loan has a prepayment penalty of 3% of principal. In 2005, $523 was received as interest expense.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

7.	RELATED PARTY TRANSACTIONS

Lightstone Real Estate Partners, the Property’s management company , which is an affiliate of certain members, charged $1,305 for management fees to the Companies, all of which is owed at December 31, 2005. Lightstone Real Estate Partner advanced $745 to the Companies during 2005 for working capital.

A member of the Company advanced $1,947 to fund working capital for certain of the properties.

The net amount due to affiliates represents non-interest bearing advances from affiliated entities and is due upon demand.

See Note 6 for additional related party transactions.

8.	RENTALS UNDER OPERATING LEASES

The Companies receive rental income from the leasing of retail shopping center space under operating leases. The Companies recognize income from tenant operating leases on a straight-line basis over the respective lease terms and, accordingly, rental income in a given period will vary from actual contractual rental amounts due. Rental income recorded in 2005 in excess of amounts contractually due was approximately $501.

The minimum annual future base rentals due under non-cancelable operating leases as of December 31, 2005, are approximately as follows:


2006	$	28,817
2007		25,335
2008		22,543
2009		19,133
2010		10,182
Thereafter		35,488

	$	141,498

Minimum annual future rentals due do not include amounts which are payable by certain tenants based upon certain reimbursable operating expenses. The tenants include national and regional chains and local retailers and, consequently, the Companies’ credit risk is concentrated in the retail industry.

LIGHTSTONE MEMBER LLC

PRC MEMBER LLC

LIGHTSTONE MEMBER II LLC

LIGHTSTONE MEMBER III LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 2005

(Dollar amounts in thousands)

9.	COMMITMENT AND CONTINGENCIES

Shenango Valley Mall is subject to a ground lease. The initial term of the ground lease expired on December 31, 2004. Lightstone exercised the first 17 year ground lease agreement option. Lightstone paid $48 per annum as ground rent through December 31, 2004. As of January 1, 2005, the new ground lease payment is based upon 10% of monthly gross revenues, as defined. The gross revenues, upon which the ground rent is computed, cannot be less than 75% of gross revenues for the year 2005. $353 was expensed as ground rent for Shenango.

A parcel of Macon Mall is under a ground lease that expires in 2071. The ground lease is subject to an annual rent payment of $54 throughout the remainder of its term. The property is responsible for all other costs including real estate taxes and utilities. $30 was expensed as ground rent for Macon.

10.

FAIR VALUE OF FINANCIAL INSTRUMENTS

As of December 31, 2005, the fair values of the Companies’ mortgage and other notes and mezzanine notes payable to related parties approximate the carrying values as the terms are similar to those currently available to the Companies for debt with similar risk and the same remaining maturities. The carrying amounts for cash and cash equivalents, restricted cash, rents and other receivables, due to affiliates, and accounts payable and other liabilities approximate fair value because of the short-term nature of these instruments.

Lightstone III

Ownership
Interests

Presidential Realty Corp.

David Lichtenstein (Managing Member)